October 26, 2015
Gold Struggles on Firmer Dollar, Fed Rate Hike Fears
(Reuters) - Gold steadied after a three-day losing streak on Monday, but was hovering close to its lowest in nearly two weeks, hurt by a strong dollar and fears the Federal Reserve could raise U.S. interest rates this year.
A rally in global equities also kept buying interest subdued for the metal, which has been weighed down all year by uncertainty over the timing of a U.S. rate hike.
Spot gold was little changed at $1,164.05 an ounce by 0335 GMT. The metal had dropped to $1,158.77 on Friday, its lowest since Oct. 13, after earlier rising 1 percent in the session, following China's move to cut interest rates for the sixth time in less than a year.
Investors initially bet the Fed would be compelled to delay a rate hike given the fragility of the global economy, but buying soon evaporated on views that the Chinese stimulus and upbeat U.S. data made a Fed rate hike more likely this year.
"U.S. dollar interest and option strikes at $1,150 should weigh upon gold over the next couple of days," said MKS Group trader Sam Laughlin, adding that interest in gold has been muted in Asia so far this morning.
The dollar rose to a 2-1/2-month high on Friday after the Chinese rate cut, though it slipped slightly on Monday.
A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.
"We remain somewhat negative on gold over the short-term, as in addition to the stronger dollar, the recent recovery in equities will be a headwind for the precious metal," said INTL FCStone analyst Edward Meir.
Global stocks rallied, following China's move to cut rates.
Bullion investors were awaiting a Fed policy meet later this week for trading cues. Higher rates could dent the appeal of non-interest-yielding bullion.
Though the U.S. central bank is not expected to hike rates at this week's meeting, investors will be watching for clues on the Fed's take on the global economy and whether the central bank would raise rates at its December meeting.
The Fed is close to raising rates for the first time in nearly a decade, though the exact timing is unclear.
Investor positioning has been more bullish.
Hedge funds and money managers raised their bullish bets in COMEX gold and silver in the week to Oct. 20, Commodity Futures Trading Commission data showed on Friday.
Net long positions in gold rose to their highest since February.